www.ibm.com/energy

Energy Networks 2014Performance Based Regulation

Matt Futch, IBM Global Policy Director

PRESENTATION TOPICS

• IBM ENERGY & UTILITIES OVERVIEW

• AUSTRALIAN MARKET OBSERVATIONS

• PERFORMANCE BASED REGULATION

www.ibm.com/energy

IBM is the lead project manager and systems integrator for many of the largest smart metering deployments in the world

United StatesOverall program manager, systems integration, Itron MDMS implementation, and business case developmentFebruary 2006 – ongoing5.5 million electric

OntarioDesign, build and operate the province-wide eMeter MDMS December 2006 – ongoing4.5 million electric

United StatesProgram management, systems integration and Oracle MDMS implementationDecember 2008 – ongoing950,000 electric

United StatesProgram management, systems integration and Ecologics MDMS implementationDecember 2008 – ongoing3.4 million electric

United StatesProgram management, systems integration, eMeter MDMS implementation, and deployment management December 2005 – ongoing1.9 million electric

Washington, DCProgram management, systems integration and Itron MDMS implementationMarch 2008 – ongoing2 million electric

MaltaTurnkey solution provision, systems integration and deployment managementDecember 2006 – ongoing250,000 electric and water

United KingdomProgram management, systems integration and SAP-USI and eMeter MDMS implementationDecember 2009 – ongoing4.1 million electric and gas

JapanOverall PMO and architecture designJanuary 2012 – ongoing10 million electric

BrazilProgram management, systems integration and eMeter MDMS implementationDecember 2011 – ongoing5.2 million electric

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Our approach focuses on three foundational capabilities

Solution Development

Solution Delivery

Partner Ecosystem

POLICY AND REGULATIONSOLUTION DEVELOPMENT AND DELIVERY

INDUSTRY THOUGHT LEADERHSIP

First of a Kind projects First of a Kind projectsSmarter Energy Research InstituteSmarter Energy Research Institute

Solutions Centers Solutions Centers

AUSTRALIAN MARKET OBSERVATIONS

© 2012 IBM Corporation6 www.ibm.com/energy

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Strategic Questions for Australia’s Energy Market

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MARKET REVIEW

PERFORMANCE BASED REGULATION

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PERFORMANCE BASED REGULATION

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PROVINCE OF ONTARIO

Primary Drivers • Massive Green Energy Push, 100% coal retirement • Increased price sensitivity from consumers • Energy Polices require grid transformation

Key Characteristics • Five year regulatory price control period • Three distinct rate setting methods • Financial reward/penalty quite stringent

Peformance Metrics• Customer Focus / Operational Effectiveness / Public Policy Responsiveness / Financial Peformance

Case Study

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PERFORMANCE BASED REGULATION

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REPUBLIC OF TURKEY

Primary Drivers • Completed Market Restructuring and Unbundling • Significant Non-Technical Losses (20%)• Drive cost effective system reliability investment

Key Characteristics • Price and Revenue Cap over regulatory period• Heavy emphasis on service quality and NTL • Standard ROE for all new distribution utilities

Peformance Metrics• SAIDI / SAIFI / POWER QUALITY METRICS

Case Study

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PERFORMANCE BASED REGULATION

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UNITED KINDGOM

Primary Drivers •Underinvestment in aging infrastructure •Government desire for increased performance•Belief that competition would engender innovation

Key Characteristics •Underinvestment in aging infrastructure •Government desire for increased performance•Belief that competition would engender innovation

Peformance Metrics

Safety / Environment / Customer Satisfaction / Connections / Social Obligations / Reliability

Case Study

© 2012 IBM Corporation12 www.ibm.com/energy

PBR COMMON DIMENSIONS